Credit Suisse said its third-quarter net profit rose sharply but still fell short of expectations, as the bank pushes ahead with streamlining efforts in the wake of the financial crisis and in the face of Swiss regulatory scrutiny.

Thanks to relatively strict local banking regulations, both Credit Suisse and rival UBS have sought to shed loans and investments from their balance sheets while bulking up on capital reserves in recent years.

Both Swiss giants have also grappled with increasing regulatory costs for their private banking units, thanks to potential legal hassles stemming from serving foreign clients who may be stashing undeclared assets.

Credit Suisse is one of 14 Swiss banks under US investigation for allegedly aiding American tax evaders. Officials in Germany have also cracked down on the use of Swiss accounts to evade taxes. In general, the crackdown has prompted money from Western European markets to flow out of Credit Suisse's private banking business in recent years—a trend that continued in the third quarter.

On Thursday, Credit Suisse said net new assets for its private banking and wealth management business rose to 8.1 billion francs ($9.1 billion) in the quarter, from 5.3 billion francs in the same period a year earlier. Outflows in Western Europe were offset by growth in emerging markets and among so-called ultra-high-net-worth clients, the bank said.

Net profit rose to 454 million francs from 254 million francs in the same period a year earlier, Credit Suisse said. Analysts had been expecting a profit of 655 million francs in the quarter. In the same period last year, results had been weighed by a 1.05 billion franc write-down due to the increased value of the bank's own debt.

While Credit Suisse has taken steps to scale back on higher-risk investment banking, Swiss regulators have pressed the lender to continue shedding assets and stockpiling a capital cushion that could help brace it—and the broader Swiss economy-—or potential calamities. That's generally given Credit Suisse less wiggle room to try and turn a profit.

Credit Suisse said Thursday it has cut risk-weighted assets at its investment bank to $169 billion, surpassing a previously set target of hitting $175 billion by the end of the year. But the investment bank also reported that pretax income tumbled 53% to 229 million francs, while net revenues at the unit fell 20% to roughly 2.6 billion francs. Credit Suisse cited "a challenging market environment," particularly in the fixed income market, though its business of underwriting stock offerings and advising on mergers and acquisitions also declined.

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While Credit Suisse said that it reduced overall headcount by 2,000 compared with the same period last year, it actually added 100 employees compared with the second quarter—thanks to seasonal hiring at its investment bank.

The bank reported that total operating expenses fell 11% to about 4.7 billion francs. Credit Suisse has previously announced plans to slash 3.2 billion Swiss francs in costs this year.